EUR/GBP plummets to over 2-month lows, farther below mid-0.8700s

   •  Brexit optimism continues to underpin the British Pound and exert downward pressure.
   •  News that the Labors will back Cooper amendment reduces chances of a no-deal Brexit.

After an initial uptick to an intraday high level of 0.8782, the EUR/GBP cross met with some fresh supply and dropped to over two-month lows in the last hour.

The cross extended this week's retracement slide from levels just north of mid-0.8700s and remained under some selling pressure for the third consecutive session, returning back to its lows from November. 

Markets have largely been optimistic over diminishing chances of a no-deal Brexit, which coupled with Tuesday’s solid UK labor market report has been the key factor behind the British Pound's outperformance against its European counterpart.

Meanwhile, the latest leg of downfall since the early European session followed reports that the Labour Party will back Cooper amendment, which lays out the option for parliament to come up with their own "Plan B" in order to prevent a no-deal Brexit outcome.

The amendment would also require the UK PM Theresa May to seek a delay of Brexit if a deal isn't passed by Feb. 26 and further reinforced market expectations that the chances of a no-deal Brexit are indeed getting slimmer.

In absence of any major market moving economic releases, either from the Euro-zone or the UK, the incoming Brexit headlines might continue to act as an exclusive driver of the pair’s momentum ahead of the latest ECB monetary policy update on Thursday.

Technical levels to watch

Immediate support is pegged near the 0.8725 level and is closely followed by the 0.8700 handle, which if broken might accelerate the fall further towards Nov. swing lows, around the 0.8655 region. On the flip side, the 0.8765-70 region now becomes immediate resistance and any subsequent recovery attempts might now confront some fresh supply near the 0.6815-20 strong hurdle.